Newspapers Losing Readers and Advertising

Trend: Newpapers are losing market share to Internet media.

Source: MSN Money - This just in: Value investors value newspapers

Consider newspapers victim 1A of the Google Economy. Before there were search engines with targeted advertising, there were full-page newspaper spreads advertising the latest white sale at Sears. When consumers wish to buy a house or motorcycle, rent an apartment or find a job today, they are much more likely to visit HomeStore, eBay, Craigslist or Monster Worldwide than slip 50 cents into a newspaper rack. Online search pinches the pricing of everything newspapers once viewed as their lifeblood.

Younger people have no nostalgic or personal connection with newspapers, and according to industry research are not inclined to ever pick them up. Even as newspaper companies have branched out into owning magazines, broadcast television and cable, they have never found a marketing angle to bring youths into the fold for their principal business units.

...newspapers are stuck with the massive, costly infrastructure to make and deliver a product that has virtually no relevance to the audience that its sponsors -- retail, entertainment and automobile advertisers -- most covet: 18- to 35-year-olds.

And frankly, there is no compelling reason for that audience to change its current behavior, as the alternatives are, in most cases, less expensive, more flexible and far more useful.

Rather than purchasing newspapers, this key segment of the consumer economy, according to researchers, is reading news and blogs online, and watching television. Their approach to news and commentary has progressively narrowed in a way that is similar to European tastes. They are viewing reports from conservative or liberal providers with whom they are already inclined to agree, and ignoring alternative views.

That doesn’t mean that newspapers are dying just yet. Yet their revenue growth is virtually nil, and profit growth -- which is what investors tend to pay up for -- is being achieved primarily via cost-cutting and accounting magic. All large newspaper chains have repeatedly guided their revenue expectations down this year, in fact, as they have been assaulted with higher input costs across the board, from newsprint (up 10%-plus this year) to gas for delivery trucks.

You might think witnessing this sort of corporate disintegration is akin to seeing buggy-whip manufacturers disappear. Yet there is an important distinction. Although investors put railroads out of their minds following the advent of jet aircraft and truck travel, those rail carriers have found their own place in the financial ecology, as low-cost haulers of large loads. Newspapers will, no doubt, also ultimately settle into their own place as the bulk provider of low-cost advertising targets.